A high and well-placed source with ties to the Manufactured Housing Institute (MHI) has told MHProNews that they are projecting a 20-30 percent drop in new HUD Code manufactured home shipments for March. As the first of the month is rapidly approaching, and the official production and shipment data for March will soon be known, that can then be compared to that insider’s tip.
With that backdrop, the flash report from Edward J. Pinto, Director, of the American Enterprise Institute (AEI) Housing Center should be of increased interest and context.
· Purchase loan rate lock activity continued to decline.
o For the week of April 20 (week 17), purchase loan rate lock activity was 17% below that for week 17 in 2019.
o However, activity may be down as much as 28% after taking into account that activity in January and February 2020 (weeks 1-8) was running 16% ahead of the same period in 2019.
o There are important differences across metros. Rate locks in some metros are holding up much better than in others.
o Detroit, Pittsburgh, and San Francisco have seen large declines, while Nashville, Columbus, and Jacksonville are weathering the storm rather well.
· With the onset of the COVID-19 pandemic, we observe important share shifts in the market.
o Highest quality borrowers are either dropping out of the market or are unable to get non-conforming jumbo loans.
o At the same time, FHA, VA, and Rural Housing Service borrowers with FICO scores below 640 are increasingly unable to get mortgages as lenders tighten up on lending standards.
· The rate of home price appreciation (HPA) continued to decelerate.
o HPA for the week of April 20, 2020 (week 17) was 4.0%, down from 7.2% during week 10.
o HPA in San Francisco and Charlotte has decelerated the most, while a few other metros such as Las Vegas and Phoenix still have strong HPA.
o So far however, only 2 among the largest 40 metros are exhibiting consistent year-over-year HPA declines over the last 3 weeks: SF and LA.
Using newly acquired data from Optimal Blue, a rate lock software provider with roughly a third market coverage, the AEI Housing Center is now able to provide near-real time Flash Housing Market Indicators (Flash HMI) on purchase loan rate lock volume, home price, credit, and cash-out refinance trends. Released each Monday, the Flash HMIs will provide much-needed and timely insights on the single-family residential housing market convulsing from the effects of the coronavirus pandemic. While Optimal Blue data are used, Edward Pinto and Tobias Peter are solely responsible for the analysis contained herein.
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Table of Contents
1. Purchase Loan Rate Locks – pg. 3
2. Share of Purchase Rate Locks by Loan Type – pg. 4
3. Purchase Borrowers by Credit Score Bin and Loan Type – pg. 5
4. Purchase Loan Credit Indicators by Loan Type – pg. 7
5. Purchase Rate Locks by Price Tier – pg. 8
6. Home Price Appreciation (HPA) Trends – pg. 9
7. Purchase Rate Lock Trends by Metro – pg. 10
8. Metro Home Price Appreciation (HPA) Trends – pg. 11
9. Cash-out Refinance – pg. 13
o Rate Locks & Cash-out Amount
o Rate Locks by Loan Type
o Loan Credit Indicators by Loan Type
10. No Cash-out Refinance – pg. 16
o Rate Locks
o Rate Locks by Loan Type
o Loan Credit Indicators by Loan Type
11. Appendix: Home Price Appreciation (HPA) Methodology – pg. 19
After extensive historical analysis of Optimal Blue data going back 7 years, we have concluded that these rate lock data track closely those reported in our National Mortgage Risk Index (NMRI), which cover 99% of the agency market. As a result, today’s Flash HMI will provide an advance look at trends which will not be reported in our NMRI until late-June, a pick-up of 3 months. In terms of home price appreciation trends, the weekly data we are beginning to report on also would not be available until late-June or even late-July and would be reported on a monthly basis.
Purchase Loan Rate Locks
· For the week of April 20 (week 17), purchase loan rate lock activity was 17% below that for week 17 in 2019.
· Purchase loan rate lock activity may be down as much as 28% after taking into account that volume in January and February 2020 (weeks 1-8) was running 16% ahead of the same period in 2019.
· The volatility during weeks 10-13 2020 was due to wildly fluctuating mortgage rates.
We derive trends in application volume from counts of Optimal Blue rate locks. To analyze the impact of the coronavirus pandemic, we overlay 2019 data on top of 2020 data. As has been widely reported, early 2020 has seen larger counts of purchase loan activity in comparison with early 2019, with volatility increasing over the past several weeks.
Share of Purchase Rate Locks by Loan Type
· For the week of April 20, 2020 (week 17) the conforming share of purchase loan rate locks was 64%, up from an average of 60% during weeks 1-8.
· The non-conforming share of purchase rate locks was 1%, down from an average of 4% from weeks 1-8.
· FHA’s share is down modestly. It now stands at 20%, down from an average of 23% during weeks 1-8.
Purchase Borrowers by Credit Score Bin and Loan Type
· With the onset of the COVID-19 pandemic, highest quality borrowers are either dropping out of the market or are unable to get non-conforming jumbo loans. The share of borrowers with a FICO score of 770+ had initially decreased from 31% to 28%, but as of last week, this share has recovered to 30%.
· At the same time, borrowers with the lowest FICO score are less able to get mortgages as lenders tighten up lending standards. The share of borrowers with a score below 640 has fallen from 10% to 5%.
· These same dynamics have played out across various loan types.
Among conforming borrowers, the share of borrowers with a FICO score of 770+ has decreased from 43% to 40% over recent weeks, while the share of borrowers with scores below 720 has increased from 23% to 24%.
The share of FHA borrowers with a credit score below 640 has halved from 32% to just 16%, while the share of borrowers with a FICO of 660-689 has increased from 23% to 30%.
The share of VA borrowers with a credit score below 640 has declined from 16% to just 9%.”
MHProNews Analysis and Commentary
There is another mainstream media report that indicates that lenders are tightening standards on credit scores for FHA, VA and USDA (Rural Development) backed home loans. The word is that getting a loan approved with a FICO of under 640 reportedly will get harder.
These factoids and research points underscore points that MHProNews has said for years, but stressed again in the report linked below.
Tony earned a journalism scholarship and earned numerous awards in history and in manufactured housing. For example, he earned the prestigious Lottinville Award in history from the University of Oklahoma, where he studied history and business management. He’s a managing member and co-founder of LifeStyle Factory Homes, LLC, the parent company to MHProNews, and MHLivingNews.com. This article reflects the LLC’s and/or the writer’s position, and may or may not reflect the views of sponsors or supporters.